Land and the wood it contains are physical assets for a timber company.
Physical assets are tangible items owned by a business or individual. These assets usually have some value and can be sold to raise money if needed. Physical assets are the opposite of intangible assets, which include patents, stocks, and intellectual property. Companies keep track of these assets on the company balance sheet, which is used to help managers and investors determine the value of the business. Some common examples of physical assets include equipment, real estate, inventory, and cash.
Physical assets include unsold inventory.
If a business owns property or real estate, that property is considered a physical asset. This can include the land where the company’s headquarters building is located, as well as land used for warehouses, factories, and retail stores. Any buildings or other structures on the ground are also physical assets. Materials and fixtures within buildings, such as lights, doors, hardware, and refrigeration units, can also be sold for cash and thus serve as a physical asset. Companies that engage in mining, drilling, or logging may have significant physical assets in the form of land, including timber or natural resources found on the property.
A company’s physical assets can include its inventory, as well as a warehouse where that inventory is stored.
Any equipment used in the business can also be sold for cash and thus represents a physical asset. This includes trucks and company vehicles, as well as desks, office furniture, and supplies. In an industrial or manufacturing business, equipment and tools can be of significant value, especially in large or relatively new facilities. Other equipment includes cleaning supplies, company computers, printers, fax machines, and even phone systems.
A company’s office furniture is among its physical assets.
Physical assets also include unsold inventory in finished and unfinished states. This may refer to complete products that have not yet shipped to stores, or simply the raw materials used to make those products. For example, in an electronics factory, all the mechanical and electrical components used to make final products can be sold for cash. The same goes for finished electronics, such as televisions or computers, that have not yet been shipped to retailers. Even raw materials and supplies that have been paid for but have not yet arrived can be considered a physical asset.
The physical assets of a business can also include cash and other financial items. This includes cash on hand, as well as money in banks and investment accounts. Stocks and bonds that can be converted to cash are also considered physical assets, while the company’s own shares are not included in this category.